Does one need an international drivers license to drive in Iceland? Even if not, is there any advantage to having one?
The advantage is never having to concern yourself on whether or not you need one in any particular country you are going to visit. So if you may go elsewhere in your travels you would be covered. Since they are only $20, it seems a small price to pay to be covered in actuality and also for any worries about if you need it or not.
As long as you have a license that is in English, you are fine and the country does not require anything extra. The information is on the rental car company websites. We almost always rent a car for our Iceland trips and have never bothered with an IDP since it is not needed there.